Agrium Inc. (TSX:AGU) (NYSE:AGU) announced today consolidated net earnings ("net earnings") of $171-million ($1.09 diluted earnings per share) for the first quarter of 2011, compared with a consolidated net loss ("net loss") of $1-million in the first quarter of 2010 ($0.01 diluted loss per share). Net earnings from continuing operations, which exclude earnings associated with AWB Limited ("AWB") Commodity Management business which is under a definitive sales agreement to Cargill Incorporated ("Cargill"), were $160-million ($1.02 diluted earnings per share) for the first quarter of 2011.

The 2011 first quarter results include a pre-tax share-based payment expense of $12-million ($0.05 diluted earnings per share) and pre-tax gains of $9-million ($0.04 diluted earnings per share) on natural gas and other commodity hedges. Excluding these items, net earnings from continuing operations would have been $162-million ($1.03 diluted earnings per share from continuing operations) for the first quarter of 2011.(1)

The financial information presented and discussed in this press release is prepared in accordance with International Financial Reporting Standards ("IFRS"). All Canadian corporations are required as of January 1, 2011 to account and report current and future financial results under IFRS. First quarter 2010 figures have been restated for comparison purposes.

"Record high crop prices and overall strong fundamentals for agriculture and the crop input market provided the basis for Agrium's outstanding quarter, particularly in light of a slow start to the spring season. Crop nutrient demand was strong in North America and globally, providing underlying support to crop nutrient prices. This contributed to our Wholesale business achieving its best first quarter ever. The same strong fundamentals also supported results for our Retail operations, as they reported substantial increases across all product lines," said Agrium President & CEO Mike Wilson.

"Our newly acquired Landmark retail business in Australia delivered solid results and managed through the challenges of 2010's flooding in Eastern Australia. The significant increase in acreage devoted to input intensive crops such as corn and cotton is expected to benefit all three of our business units this spring. With the strength in markets across most products and services, we expect a great second quarter and believe industry fundamentals will remain strong in 2011," continued Mr. Wilson.(2)

Agrium is providing guidance for the first half of 2011 of $4.40 to $4.90 diluted earnings per share on continuing operations.(2)

(2) See disclosure in the section "Outlook, Key Risks and Uncertainties" in our 2011 first quarter Management's Discussion and Analysis and additional assumptions in the section "Management's Discussion and Analysis".

MANAGEMENT'S DISCUSSION AND ANALYSIS

May 4, 2011

Unless otherwise indicated, the financial information presented and discussed in this Management's Discussion and Analysis ("MD&A") is prepared in accordance with International Financial Reporting Standards ("IFRS"), and all comparisons of results for the first quarter of 2011 (three months ended March 31, 2011) are against results for the first quarter of 2010 (three months ended March 31, 2010). All dollar amounts refer to United States ("U.S.") dollars except otherwise stated.

The following interim MD&A updates our annual MD&A included in our 2010 Annual Report to Shareholders, to which our readers are referred and is as of May 4, 2011. The Board of Directors carries out its responsibility for review of this disclosure principally through its Audit Committee, comprised exclusively of independent directors. The Audit Committee reviews, and prior to publication, approves, pursuant to the authority delegated to it by the Board of Directors, this disclosure. No update is provided where an item is not material or there has been no material change from the discussion in our annual MD&A. Forward-Looking Statements are outlined after the Outlook, Key Risks and Uncertainties section of this press release. The major assumptions made in preparing our first half guidance on continuing operations are outlined below and include, but are not limited to:

- Wholesale fertilizer prices approximating current market prices through the second quarter of 2011 with the exception of those volumes already committed under pricing programs;

- Wholesale fertilizer sales volumes consistent with the same levels in the second quarter of 2010;

- Retail North America fertilizer and chemical gross margin percentages consistent with margin percentages realized in the second quarter of 2010;

- Retail North American fertilizer sales volumes consistent with sales volumes in the second quarter of 2010;

- Exchange rates for the U.S. dollar relative to the Canadian and Australian dollar to stay consistent with the current trading levels;

- Average NYMEX gas pricing for the second quarter approximating $4.40 per MMBtu; and,

- The exclusion from the guidance range of the effects in the second quarter of:

-- share-based payment expense or recovery resulting from movement in Agrium's share price for which a $1 change in stock price equates to approximately a $0.01 change in earnings per share;

Agrium's 2011 first quarter consolidated net earnings ("net earnings") were $171-million, or $1.09 diluted earnings per share, compared to a consolidated net loss ("net loss") of $1-million, or $0.01 diluted loss per share, for the same quarter of 2010.

The $133-million increase in expenses was primarily driven by higher Retail selling and general and administrative expenses due to the addition of the Landmark business in the fourth quarter of 2010. Included in these costs were $8-million of severance expense related to the AWB acquisition. Our consolidated EBIT increased by $230-million for this quarter.

Below is a summary of our other expenses for the first quarter of 2011 and 2010:

The effective tax rate was 27 percent for the first quarter of 2011 which was comparable to the effective tax rate for the same period last year.

BUSINESS SEGMENT PERFORMANCE

Retail

Retail's 2011 first quarter sales were $1.8-billion, an increase of $762-million from the first quarter of 2010. The 72 percent increase in sales was largely due to the combination of the inclusion of the Australian Landmark retail operations, as well as higher crop input volumes and prices. Excluding acquisitions made since January 1, 2010, sales for Agrium's retail legacy operations were up 22 percent over the same period last year. Gross profit in the current quarter was $340-million, more than double the $162-million for the same period last year. Retail EBIT was a loss of $15-million in the first quarter of 2011, a significant improvement over the loss of $68-million in the first quarter of 2010. Landmark retail operations contributed a positive EBIT of $3-million and $13-million in EBITDA in the first quarter of 2011.

Crop nutrient sales were $707-million in the first quarter of 2011, compared to $371-million for the same quarter last year. The increase was due to significantly higher sales volumes and crop nutrient prices, as well as the addition of the Landmark business. Crop nutrient gross profit was $115-million this quarter compared to $63-million in the first quarter of 2010. Crop nutrient margins averaged 16 percent this quarter. Crop nutrient sales from the Landmark business accounted for 26 percent of total crop nutrient revenues this quarter and about 6 percent of gross profit. The North American nutrient margin was 21 percent in the current quarter.

Crop protection sales were $638-million in the first quarter of 2011, a 38 percent increase over the $462-million in sales for the same period last year. Gross profit this quarter was $102-million, compared with $69-million in 2010. The increase in revenue and gross profit was due to a combination of the addition of the Australian Landmark business and generally higher sales volumes across much of North America. Landmark accounted for approximately 20 percent of our crop protection total sales and gross profit this quarter.

Seed sales were $230-million in the first quarter of 2011, compared to $191-million in the same period last year. North American sales accounted for over 75 percent of the increase. Gross profit this quarter was $35-million compared to $15-million in the first quarter of 2010.

Merchandise sales totaled $144-million in the first quarter of 2011 compared to $21-million in the first quarter of 2010. Gross profit from merchandise sales was $17-million in the current quarter compared to $1-million in the same period last year. The increase in revenue and gross profit was due to the addition of the Landmark business.

Sales of application and other services were $103-million in the first quarter of 2011 compared to $15-million in the first quarter of 2010. Gross profit totaled $71-million this quarter, compared to $14-million in the first quarter of 2010. The significant increase in sales and gross profit over the previous year was due to the addition of the Landmark business and increased demand for nutrient application services in North America. Record crop prices have supported demand for application services across North American agriculture. This product segment includes a variety of service offerings at our Landmark retail operations including: livestock and wool marketing, insurance commissions and rural real estate services.

Retail selling expenses for the first quarter of 2011 were $335-million, compared to $222-million in the same quarter of 2010. The increase was due primarily to the inclusion of the Landmark retail business. Selling expenses as a percentage of sales in the first quarter of 2011 was 18 percent compared to 21 percent in the first quarter of 2010. On a same-store basis, selling expenses were 2 percent higher this quarter as compared to the same period last year. This increase in expenses was largely due to higher performance incentives and fuel prices.

Wholesale

Wholesale's sales were $1.2-billion for the first quarter of 2011, a record for a first quarter, and 45 percent higher than the $848-million achieved in the first quarter of 2010. Gross profit was $409-million in the first quarter of 2011, almost double the $218-million reported in the same period in 2010. Wholesale also reported a record first quarter EBIT of $377-million in 2011, substantially higher than the $147-million earned in the first quarter of 2010. Strong agricultural fundamentals supported demand and prices for nutrient products.

Gross profit for nitrogen was $151-million this quarter, compared to $72-million in the same quarter last year. The increase in gross profit was due to a combination of higher realized sales prices and lower natural gas costs. Urea sales volumes were impacted slightly this quarter due to the wet and cool spring in much of North America, although UAN sales were up 29 percent from last year on strong demand. Cost of product sold was $244 per tonne this quarter, 6 percent lower than the $260 per tonne in the first quarter of 2010.

The U.S. benchmark (NYMEX) natural gas price for the first quarter of 2011 was $4.14/MMBtu, versus $5.38/MMBtu in the same quarter last year and $3.81/MMBtu in the fourth quarter of 2010. The AECO (Alberta) basis differential was a $0.32/MMBtu discount to NYMEX in the first quarter of 2011, which was a slightly larger discount than in the first quarter of 2010. For the first quarter of 2011, Agrium's average natural gas cost in cost of product sold was $3.90/MMBtu ($4.11/MMBtu including the impact of realized losses on natural gas derivatives) compared to $5.00/MMBtu for the same period in 2010 ($5.21/MMBtu including the impact of realized losses on natural gas derivatives). Hedging gains or losses on all gas derivatives are reported below gross profit in other expenses and therefore not included in cost of product sold.

Gross profit for potash this quarter was $125-million, $19-million higher than the same period in 2010. The increase in gross profit was due to a significant rebound in international and domestic potash prices. International sales volumes reached 265,000 tonnes in the first quarter of 2011, a 43 percent increase from the same period last year, due to strong demand from Asia and Brazil. Domestic sales volumes were 212,000 tonnes in the first quarter of 2011, compared to 349,000 tonnes in the same period last year. The lower volumes this year were due to a late start to the spring season in the U.S. this year, compared to the strong demand in the first quarter of 2010. The total potash cost of product sold this quarter was $147 per tonne as compared to $159 per tonne in the first quarter of 2010. The decrease was due to lower freight costs per tonne, partly offset by the strengthening in the Canadian dollar against the U.S. dollar. The resulting gross margin was $262 per tonne this quarter versus $199 per tonne for the first quarter of 2010.

Phosphate gross profit was $95-million in the first quarter of 2011, over five times greater than the $18-million reported for the same quarter last year. The increase was due to substantially higher realized sales prices of $778 per tonne for the first quarter of 2011 compared to $506 per tonne for the same period in 2010. Phosphate sales volumes were 22 percent higher than the same quarter last year, as demand for phosphate products was

strong due in part to customer concerns over the potential for tight supply availability in the second quarter of 2011. Phosphate cost of product sold was $468 per tonne, an 8 percent increase over the same period last year, due to a higher cost of sulphur and phosphate rock. The resulting gross margin per tonne was $310 per tonne versus $72 per tonne in the first quarter of 2010.

Gross profit for product purchased for resale was $16-million, $4-million higher than the first quarter of 2010. The increase was due to higher sales volumes this year as global demand for all three nutrients was strong. Gross margins in the first quarter of 2011 of $18 per tonne were consistent with the first quarter of 2010.

First quarter Wholesale expenses were $32-million, $39-million lower than the same period last year. The majority of the decrease was due to mark-to-market gains on natural gas and other derivatives of $14-million in the first quarter of 2011 compared to $61-million in losses for the same period in 2010. Realized losses on natural gas and other derivatives were $6-million compared to a loss of $7-million in 2010. Equity earnings from the MOPCO Egyptian nitrogen facility were $7-million lower this quarter than in the first quarter of 2010 primarily due to a one-time deferred tax adjustment of $6-million this quarter. The MOPCO facility has continued to run at normal operating rates in 2011 and the project to triple the production capacity is on schedule for completion in mid-2012. In addition, potash profit and capital taxes were $8-million higher this quarter than the same period last year due primarily to a large favourable adjustment reported in the first quarter of 2010 related to the 2009 final potash tax return.

Advanced Technologies

Advanced Technologies' first quarter 2011 gross profit was $16-million compared to $15-million in the first quarter of 2010. This increase in gross profit was due to increased sales volumes of ESN and controlled-release products in the turf and ornamental segment, as well as increased sales activity in both the U.S. and Canadian retail markets. This increase in volumes was supported by new ESN production at our New Madrid facility which came on-line in March of 2010.

EBITDA this quarter was $1-million versus $3-million in the first quarter of 2010. Higher selling and general and administrative costs offset improved gross profit in the first quarter of 2011 compared to the same period last year. Selling, general and administrative costs for AAT were $5-million higher this quarter versus the same period in 2010 due primarily to the expansion of the Direct Solutions sales force which focuses on retail sales to end users. Other income decreased by $2-million in the first quarter of 2011 compared to the same period last year due to lower earnings from our equity ownership in Hanfeng Evergreen Inc.

Other

EBIT for our Other non-operating business unit for the first quarter of 2011 was a loss of $98-million compared to a loss of $49-million for the first quarter of 2010. The increase in loss was driven by:

- A $52-million gain realized from the sale of 1.2 million shares of CF Industries Holdings, Inc. ("CF") in the first quarter of 2010.

- A net loss of $26-million primarily from foreign exchange derivatives entered into in anticipation of the sale of the Commodity Management business to Cargill, Incorporated ("Cargill") as the U.S. dollar weakened during the first quarter of 2011. This was more than offset by a $29-million foreign exchange gain primarily from the remeasurement of intercompany loans.

DISCONTINUED OPERATIONS

We entered into an agreement on December 15, 2010 with Cargill to sell the majority of the Commodity Management business of AWB. Completion of the sale is expected in the first half of 2011. The purchase price to be paid by Cargill will be the net asset value of the sold businesses as at the completion date of the transaction, plus a premium. We have committed to a plan to sell certain other businesses that form part of the Commodity Management business that is not being acquired by Cargill. In addition to the sale of the Commodity Management business, the pool management operations of AWB Harvest Finance Limited ("AWBHF") will be transferred to Cargill. We have agreed to various terms and conditions and indemnifications pursuant to the sale of the Commodity Management business, including an indemnity for litigation related to the Oil-For-Food Programme, as described in note 2 of our Condensed Consolidated Interim Financial Statements for the three months ended March 31, 2011.

Commodity Management operations included in the agreement with Cargill are reported as discontinued operations because their operations and cash flows will be eliminated from continuing operations as a result of the disposal transaction and we will not have any significant continuing involvement in the operations after the disposal transaction. Assets and liabilities related to discontinued operations are presented separately on the consolidated balance sheets.

Net earnings from discontinued operations for the first quarter of 2011 was $11-million versus nil in the same period of 2010.

FINANCIAL CONDITION

The following are changes to working capital on our Condensed Consolidated Balance Sheets in the three-month period ended March 31, 2011.

----------------------------------------------------------------------------
As at March December
(millions of 31, 31, Explanation of
U.S. dollars) 2011 2010 $ Change % Change the change in balance
----------------------------------------------------------------------------
Current assets
Cash and cash See discussion under the
equivalents 447 635 (188) (30%) Section "Liquidity and
Capital Resources".
Accounts 2,105 1,793 312 17% Increased sales in Q1
receivable 2011 and increased
Retail rebates.
Inventories 3,656 2,502 1,154 46% Seasonal Retail inventory
build-up in preparation
for the spring season,
as well as increased
product costs.
Prepaid 415 848 (433) (51%) Drawdown of prepaid
expenses and inventory as Retail
deposits takes delivery of
product in anticipation
of the spring season
demand.
Marketable - 3 (3) (100%) -
securities
Assets of 1,632 1,320 312 24% -
discontinued
operations
----------------------------------------------------------------------------
Current
liabilities
Short-term debt 547 517 30 6% Increased working capital
needs for Agrium Europe
due to increased
inventory purchases and
receivables in Q1 2011.
Accounts 3,863 2,666 1,197 45% Retail inventory
payable purchases made in
anticipation of the
spring season and
customer prepayments
received but not yet
drawn down for the
upcoming spring
application.
Current portion 53 125 (72) (58%) Debentures of
of long-term $125-million were repaid
debt February 15, 2011 while
South America Retail
line of credit of $53-
million is due in
October 2011.
Current portion 213 198 15 8% -
of other
provisions
Liabilities of 1,090 1,020 70 7% -
discontinued
operations
----------------------------------------------------------------------------
Working capital 2,489 2,575 (86) (3%)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

LIQUIDITY AND CAPITAL RESOURCES

Below is a summary of our cash provided by or used in operating, investing, and financing activities as reflected in the Condensed Consolidated Statements of Cash Flows:

Three months ended March 31,
----------------------------------------------------------------------------
(Millions of U.S. dollars) 2011 2010 Change
----------------------------------------------------------------------------
Cash provided by (used in) operating activities 402 (111) 513
----------------------------------------------------------------------------
Cash (used in) provided by investing activities (162) 60 (222)
----------------------------------------------------------------------------
Cash (used in) provided by financing activities (108) 25 (133)
----------------------------------------------------------------------------
Effect of exchange rate changes on cash and cash
equivalents (10) - (10)
----------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents
from continuing operations 122 (26) 148
----------------------------------------------------------------------------
----------------------------------------------------------------------------
The sources and uses of cash for the three months ended March 31, 2011 are
summarized below:
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cash provided by operating activities - Drivers behind the $513-million
increase in source of cash
----------------------------------------------------------------------------
Source of cash - $161-million resulting from increase in consolidated net
earnings from continuing operations adjusted for changes
in non-cash items, primarily associated with a $30-million
unrealized gain on derivative financial instruments in Q1
2011 versus a $61-million unrealized loss in Q1 2010, and
a $52-million gain on the sale of CF shares in Q1 2010.
- $389-million decrease in non-cash working capital. The
decrease in non-cash working capital was primarily driven
by higher accounts payable and lower prepaid expenses and
deposits, partially offset by higher inventories and
accounts receivable.
----------------------------------------------------------------------------
Cash used in investing activities - Drivers behind the $222-million increase
in use of cash
----------------------------------------------------------------------------
Use of cash - Proceeds of $117-million received on the sale of our
shares in CF in Q1 2010;
- $36-million investment purchased in Q1 2011 versus
proceeds of $25-million received in Q1 2010 on the sale
of other marketable securities; and
- $34-million increase in capital expenditures.
----------------------------------------------------------------------------
Cash used in financing activities - Drivers behind the $133-million increase
in use of cash
----------------------------------------------------------------------------
Use of cash - Repayment of $125-million aggregate principal amount of
debentures that were due February 15, 2011.
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Our short-term debt as at March 31, 2011 is summarized as follows:
----------------------------------------------------------------------------
Short-term Debt Total Unutilized Utilized
----------------------------------------------------------------------------
(millions of U.S. dollars)
North American facilities expiring 2012(a) 775 735 40
North American accounts receivable
securitization(b) 200 200 -
European facilities expiring in 2011 to 2012 201 29 172
South American facilities expiring 2011 to 2012 133 66 67
Australian facilities expiring 2011 130 44 86
Australian accounts receivable securitization(b) 258 76 182
----------------------------------------------------------------------------
1,697 1,150 547
----------------------------------------------------------------------------
----------------------------------------------------------------------------
a) Outstanding letters of credit issued under our revolving credit
facilities at March 31, 2011 were $77-million, reducing credit available
under the facilities to $658-million.
b) For further information, see discussion under the section "Off Balance
Sheet Arrangements" on page 55 of our 2010 Annual Report.

OUTSTANDING SHARE DATA

The number of outstanding shares as at April 30, 2011 was approximately 158 million. As at April 30, 2011, the number of stock options (issuable assuming full conversion, where each option granted can be exercised for one common share) outstanding were approximately 0.4 million.

The agricultural products business is seasonal in nature. Consequently, sales and gross profit comparisons made on a year-over-year basis are more appropriate than quarter-over-quarter. Crop input sales are primarily concentrated in the spring and fall crop input application seasons, which are in the second quarter and fourth quarter. Crop nutrient inventories are normally accumulated leading up to the application season. Cash collections generally occur after the application season is complete in the Americas and Australia. Our recent acquisition of AWB, which has a majority of its earnings from the second and third quarters of the calendar year, may have some impact on comparability.

Effective January 1, 2011, Agrium adopted IFRS as issued by the International Accounting Standards Board. The selected quarterly information for 2011 and 2010 are presented based on IFRS, while those for 2009 are presented based on Canadian GAAP. As such, direct comparison may not be appropriate.

BUSINESS ACQUISITIONS

On December 3, 2010, we acquired 100 percent of AWB, an agribusiness operating in Australia, for $1.2-billion in cash and $37-million of acquisition costs. On December 15, 2010, we announced an agreement to sell the majority of the Commodity Management business of AWB. We will retain the Landmark retail operations, including over 200 company-owned retail locations and over 140 retail franchise and wholesale customer locations in Australia. The acquired business is included in the Retail operating segment.

NON-IFRS FINANCIAL MEASURES

In the discussion of our performance for the quarter, in addition to the primary measures of earnings and earnings per share reported in accordance with IFRS, we make reference to EBITDA (earnings (loss) from continuing operations before finance costs, income taxes, depreciation and amortization). We consider EBITDA to be useful measures of performance because income tax jurisdictions and business segments are not synonymous and we believe that allocation of income tax charges distorts the comparability of historical performance for the different business segments. Similarly, financing and related interest charges cannot be allocated to all business units on a basis that is meaningful for comparison with other companies.

EBITDA is not a recognized measure under IFRS, and our method of calculation may not be comparable to other companies. Similarly, EBITDA should not be used as an alternative to cash provided by (used in) operating activities as determined in accordance with IFRS.

The following table is a reconciliation of EBITDA to consolidated net earnings (loss) from continuing operations as calculated in accordance with IFRS:

The information presented on risk management and key business risks on pages 70 - 79 in our 2010 Annual Report has not changed materially since December 31, 2010.

CONTROLS & PROCEDURES

There have been no changes in our internal control over financial reporting during the quarter ended March 31, 2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

OUTLOOK, KEY RISKS AND UNCERTAINTIES

The fundamental agricultural outlook remains very positive; however, the first quarter saw volatility in commodity prices stemming primarily from political unrest in the Middle East/North Africa and the tsunami in Japan. Many global crop prices are trading at historically high levels. This is expected to lead to increased planted area and more intensive growing practices on a global scale, which is expected to support demand for crop nutrients, crop protection and seed markets throughout 2011. U.S. cash corn prices have set records in two of the past three months, driven by projections of tight carryout in 2010/11 and the need to attract a significant increase in planted area in 2011. The United States Department of Agriculture (USDA) stated in its Prospective Plantings Report that U.S. growers intended to plant 92 million acres of corn in 2011, the second highest total since the 1940s and an increase of 4 million acres from a year ago. In total, major crop area in the U.S. could increase by more than 8 million acres according to the Prospective Plantings report.

Strong agriculture fundamentals have also supported demand for crop protection products and prices for most products are largely stable to slightly higher. Chinese glyphosate prices are trending higher, driven in part by increasing raw material costs. Seed demand is expected to be strong, driven by significant increases in seeded area in general, and corn and cotton in particular. Prices for most chemicals and seed are largely set for the spring/summer season and are expected to trend higher later in 2011, particularly if crop prices remain at high levels.

Nitrogen markets have been mixed in the first quarter of 2011, with relatively strong ammonia and UAN prices and some weakening in urea prices. The pressure on urea prices in the first quarter was partly due to extremely strong shipments of urea in the second half of 2010, including large volumes of Chinese urea exports in November and December. In recent weeks, the international price of urea has firmed up and the overall nitrogen fundamentals remain positive. For the first time since 2002, The Fertilizer Institute ("TFI") reported a decline in North American urea inventories in the month of March. The key risks to the nitrogen market include the potential for significant urea exports from China, once the export taxes are lowered for the period July 1 through October 31, and the possibility for changes in natural gas prices in Europe, including the potential for Russia to lower the price of gas for Ukrainian producers.

Phosphate markets remain very strong. India is a key driver of the phosphate market given it is expected to account for 35 percent of the global DAP/MAP import market in 2011. As a result, the key risk for the phosphate market would include Indian import levels for the remainder of 2011 and the potential for Chinese exports when their export taxes are lowered from June 1 to September 30. Spot market prices for two key inputs, ammonia and sulphur, have increased in 2011 resulting in higher production costs for most phosphate producers which increases costs and may provide support to phosphate prices. Most industry analysts expect the Ma'aden Phosphate Project to begin production sometime in the second half of 2011, but most do not expect a significant export volume from the facility until 2012.

Global potash demand continues to improve. The International Fertilizer Industry Association (IFA) reported that 2010 potash deliveries totaled 55 million tonnes, significantly higher than expected earlier in the year. The TFI reported that North American potash inventories declined 9 percent in March 2011 to levels 25 percent below average. Most industry analysts expect further improvement in global potash consumption in 2011. A key uncertainty in the potash market is the timing and volume of a new supply agreement with India.

Forward-Looking Statements

Certain statements and other information included in this press release constitute "forward looking information" within the meaning of applicable Canadian securities legislation or constitute "forward-looking statements" within the meaning of applicable U.S. securities legislation (collectively, the "forward-looking statements"). All statements in this press release, other than those relating to historical information or current conditions, are forward-looking statements, including, but not limited to, statements as to management's expectations with respect to: future crop and crop input volumes, demand, margins, prices and sales; business and financial prospects; and other plans, strategies, objectives and expectations, including with respect to future operations of Agrium. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from such forward-looking statements.

All of the forward-looking statements are qualified by the assumptions that are stated or inherent in such forward-looking statements, including the assumptions listed below. Although Agrium believes that these assumptions are reasonable, this list is not exhaustive of the factors that may affect any of the forward-looking statements and the reader should not place an undue reliance on these assumptions and such forward-looking statements. The key assumptions that have been made in connection with the forward-looking statements include the following: Agrium's ability to successfully integrate and realize the anticipated benefits of its acquisitions, including the acquisition of retained AWB businesses; Agrium's ability to operate Landmark (AWB's retail business) and improve average margins for this business; and Agrium's success in integrating its business systems and supply chain management processes following the acquisition of AWB.

Events or circumstances that could cause actual results to differ materially from those in the forward-looking statements, include, but are not limited to: general economic, market and business conditions, weather conditions including impacts from regional flooding and/or drought conditions; crop prices; the supply and demand and price levels for our major products; governmental and regulatory requirements and actions by governmental authorities, including changes in government policy, changes in environmental, tax and other laws or regulations and the interpretation thereof, and political risks, including civil unrest, actions by armed groups or conflict. Additionally, there are risks associated with Agrium's recent acquisition of AWB, including: timing and costs of the associated integration of the retained AWB businesses, the size and timing of expected synergies could be less favourable than anticipated; disruption from the acquisition making it more difficult to maintain relationships with customers, employees and suppliers; AWB is subject to dispute and litigation risk (including as a result of being named in litigation commenced by the Iraqi Government relating to the United Nations Oil-For-Food Programme), as well as counterparty and sovereign risk; and other risk factors detailed from time to time in Agrium reports filed with the Canadian securities regulators and the Securities and Exchange Commission in the United States.

Agrium disclaims any intention or obligation to update or revise any forward-looking statements in this press release as a result of new information or future events, except as may be required under applicable U.S. federal securities laws or applicable Canadian securities legislation.

OTHER

Agrium Inc. is a major Retail supplier of agricultural products and services in North America, South America and Australia and a leading global Wholesale producer and marketer of all three major agricultural nutrients and the premier supplier of specialty fertilizers in North America through our Advanced Technologies business unit. Agrium's strategy is to grow across the value chain through acquisition, incremental expansion of its existing operations and through the development, commercialization and marketing of new products and international opportunities. Our strategy places particular emphasis on growth opportunities that both increase and stabilize our earnings profile in the continuing transformation of Agrium.

A WEBSITE SIMULCAST of the 2011 1st Quarter Conference Call will be available in a listen-only mode beginning Wednesday, May 4, 2011 at 9:30 a.m. MT (11:30 a.m. ET). Please visit the following website: www.agrium.com

Agrium Inc. is incorporated under the laws of Canada with common shares listed under the symbol "AGU" on the New York Stock Exchange and the Toronto Stock Exchange. Agrium is a major retail supplier of agricultural products and services in North and South America and Australia and a leading global producer and marketer of agricultural nutrients and industrial products. We produce and market three primary groups of nutrients: nitrogen, phosphate and potash as well as controlled-release crop nutrients and micronutrients. Our Corporate head office is located at 13131 Lake Fraser Drive S.E. Calgary, Alberta, Canada. Our operations are conducted globally from our Wholesale head office in Calgary, and our Retail and Advanced Technologies head offices in Loveland, Colorado, U.S.A.

Basis of preparation and statement of compliance

These condensed consolidated interim financial statements ("interim financial statements") of Agrium Inc. were approved for issuance by the Board of Directors on May 3, 2011. We prepared the interim financial statements in accordance with IAS 34 Interim Financial Reporting using accounting policies consistent with International Financial Reporting Standards ("IFRS") issued by the International Accounting Standards Board ("IASB"). These are our first interim financial statements for part of the period covered by our first consolidated annual financial statements prepared in accordance with IFRS for the year ending December 31, 2011. Disclosures concerning the transition from Canadian generally accepted accounting principles to IFRS are provided in note 19. These interim financial statements do not include all disclosures normally provided in consolidated annual financial statements and should be read in conjunction with our audited consolidated financial statements for the year ended December 31, 2010.

Seasonality in our business results from the increased demand for our products during planting seasons. Sales are generally higher in the second and third quarters.

These interim financial statements are presented in U.S. dollars, which is our presentation and functional currency. We have prepared these interim financial statements using the historical cost basis except for certain financial instruments and non-current assets, liabilities for cash-settled share-based payment arrangements, and assets and obligations of post-employment benefit plans. Our policies for these items are set out in the notes below.

Significant accounting policies

a) Key accounting estimates and judgments

The preparation of financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Estimates are used when accounting for items such as collectibility of receivables, rebates, net realizable value of inventory, estimated useful lives and impairment of long-lived assets, goodwill impairment testing, allocation of acquisition purchase prices, asset retirement obligations, environmental remediation, employee future benefits, share-based payments, income taxes, fair value of financial assets and liabilities and amounts and likelihood of contingencies. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

b) Principles of consolidation

Subsidiaries

These consolidated financial statements include the accounts of Agrium Inc. its subsidiaries, and its proportionate share of revenues, expenses, assets and liabilities of joint ventures, which are the entities over which Agrium has control. Control exists when the company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefit from its activities. In these interim financial statements, we, us, our and Agrium mean Agrium Inc., its subsidiaries and joint ventures. All intercompany transactions and balances have been eliminated.

Associates

Associates are those entities in which we have significant influence, but not control, over the financial and operating policies. Significant influence is presumed to exist when we hold between 20 and 50 percent of the voting power of another entity, but can also arise if we hold less than 20 percent of an entity if we have the power to be actively involved and influential in policy decisions affecting the entity.

Investments in associates are accounted for using the equity method and are recognized initially at cost. Our investment includes goodwill identified on acquisition, net of any accumulated impairment losses. The consolidated financial statements include our share of the income and expenses and equity movements of equity accounted investees from the date that significant influence or joint control commences until the date that it ceases.

Joint ventures

Joint ventures are those entities over whose activity we have joint control, established by contractual agreement and requiring unanimous consent for strategic financial and operating decisions. Jointly controlled entities are accounted for using proportionate consolidation. Our share of the assets, liabilities, income and expenses of jointly controlled entities are combined with the equivalent items in the consolidated financial statements on a line by line basis. Where we transact with our jointly controlled entities, unrealized profits and losses are eliminated to the extent of our interest in the joint venture.

c) Business combinations

Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The consideration for each acquisition is measured at the aggregate of the fair values at the date of exchange of assets given, liabilities incurred or assumed, and equity instruments we issued in exchange for control of the acquiree. Acquisition-related costs are recognized in net earnings as incurred.

The interest of non-controlling shareholders in the acquiree is initially measured at the non-controlling shareholders' proportion of the net fair value of the assets, liabilities and contingent liabilities recognized.

d) Foreign currency translation

The functional currency for each of our subsidiaries, jointly controlled entities and associates is the currency of the primary economic environment in which they operate, which is the U.S. dollar, the Canadian dollar, the Australian dollar and the Euro. Determining the primary economic environment in which an entity operates requires management to consider several factors and use judgment.

All transactions that are not denominated in an entity's functional currency are foreign currency transactions. These transactions are initially recorded in the functional currency by applying the appropriate monthly average rate which best approximates the actual rate of the transaction. Monetary assets and liabilities denominated in foreign currencies are re-measured at the functional currency rate of exchange at the balance sheet date. All differences are recognized in the consolidated statement of operations. Non monetary items measured at historical cost are not re-measured - they remain at the exchange rate from the date of the transaction. Non monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

The assets and liabilities of foreign operations that are not denominated in the presentation currency, including goodwill and fair value adjustments arising on acquisition, are translated to our presentation currency at exchange rates at the reporting date. Income, expenses and capital transactions are translated at the average exchange rate for the month. Foreign currency differences are recognized directly in equity. When a foreign operation is disposed of, the relevant amount of foreign currency translation in equity is reclassified to net earnings.

e) Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable. We recognize revenue based on individual contractual terms when all of the following criteria are met: the significant risks and rewards of ownership of the goods have been transferred to the customer; we retain neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold; the amount of revenue and costs incurred or to be incurred can be measured reliably; and, it is probable that the economic benefits associated with the transaction will flow to us. These conditions are generally satisfied when title passes to the customer according to the sales agreement which in most cases, is when product is picked up by the customer or delivered to the destination specified by the customer, which is typically a customer's premises, the vessel on which the product will be shipped, or the destination port. Revenue is reported net of sales taxes, returns, discounts and rebates.

f) Rebates

We enter into agreements with suppliers providing for vendor rebates typically based on the achievement of specified purchase volumes or sales levels. We account for rebates and prepay discounts as a reduction of the prices of the suppliers' products. Rebates that are probable and can be reasonably estimated are accrued based on total estimated crop year performance. Rebates that are not probable or estimable are accrued when certain milestones are achieved. Rebates not covered by binding agreements or published vendor programs are accrued when conclusive documentation of right of receipt is obtained.

Rebates based on the amount of materials purchased reduce cost of product as inventory is sold. Rebates that are based on sales volume are offset to cost of product when we determine that they have been earned based on sales volume of related products.

g) Income taxes

Income tax expense comprises current and deferred tax. Income tax expense is recognized in net earnings except to the extent that it relates to items recognized directly in equity, in which case it is recognized directly in equity or in other comprehensive income.

Current income tax is the expected tax payable (recoverable) on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable (recoverable) in respect of previous years.

Deferred income tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable income. Deferred income tax liabilities are generally recognized for all taxable temporary differences. Deferred income tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable income will be available against which those deductible temporary differences can be utilized.

The carrying amount of deferred income tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable income will be available to allow all or part of the asset to be recovered.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to set off current income tax assets against current income tax liabilities and when they relate to income taxes levied by the same taxation authority.

h) Financial instruments

All financial assets and financial liabilities are initially recognized at fair value. The subsequent measurement of financial instruments depends on their classification as follows:

Financial instrument classification Subsequent measurement of gains or
losses at each period-end
----------------------------------------------------------------------------
Fair value through profit or loss Fair value; unrealized gains or losses
(assets and liabilities) recognized in net earnings
----------------------------------------------------------------------------
Available for sale (assets) Fair value; unrealized gains and
losses recognized in other
comprehensive income; recognized in
net earnings on sale of the asset or
when asset is written down as impaired
----------------------------------------------------------------------------
Held to maturity investments Amortized cost using the effective
------------------------------------- interest rate method; recognized in
Loans and receivables net earnings, if asset/liability is
------------------------------------- derecognized or asset is impaired
Other financial liabilities
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Where commodity derivative contracts under master netting arrangements include both asset and liability positions, we offset the fair value amounts recognized for multiple similar derivative instruments executed with the same counterparty, including any related cash collateral asset or obligation. Transaction costs of financial instruments are recorded as a reduction of the cost of the instruments except for costs of financial instruments classified as fair value through net earnings, which are expensed as incurred.

i) Cash and cash equivalents

Cash equivalents are carried at fair value, and consist of short-term investments with an original maturity of three months or less.

j) Accounts receivable and allowance for doubtful accounts

We evaluate collectibility of specific customer receivables depending on the nature of the sale. Collectibility of receivables is reviewed and the allowance for doubtful accounts is adjusted on an ongoing basis. Account balances are charged to net earnings when we determine that it is probable that the receivable will not be collected. Interest accrues on all trade receivables from the due date, which may vary with certain geographic or seasonal programs.

We have facilities in the U.S. and Australia that enable us to sell certain short-term trade accounts receivable to third parties on an ongoing basis. We continue to service the sold accounts receivable; amounts associated with the servicing liability are not material. We record sales and derecognize accounts receivable when the arrangement transfers substantially all the risks and rewards of ownership of the receivables to a third party. Where this does not occur, the arrangements are recorded as secured borrowings.

k) Inventories

Wholesale inventories, consisting primarily of crop nutrients, operating supplies and raw materials, include both direct and indirect production and purchase costs, depreciation and amortization on assets employed directly in production, and freight to transport the product to the storage facilities. Crop nutrients include our produced products and products purchased for resale. Operating supplies include catalysts used in the production process, materials used for repairs and maintenance and other supplies. Inventories are valued at the lower of cost on a weighted-average basis and net realizable value.

Retail inventories, consisting primarily of crop nutrients, crop protection products, seed and merchandise include the cost of delivery to move the product to storage facilities. Inventories are recorded at the lower of cost on a weighted-average basis and net realizable value.

Advanced Technologies inventories, consisting primarily of raw materials and controlled-release products, include both direct and indirect production costs and depreciation on assets employed directly in production. Inventories are recorded at the lower of cost determined on a first-in, first-out basis and net realizable value.

l) Property, plant and equipment

Property, plant and equipment are measured at historical cost less accumulated depreciation and accumulated impairment loss. The cost of property, plant and equipment comprises its purchase price and any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. If a legal or constructive obligation exists to decommission property, plant and equipment, the discounted value of the obligation is included in the carrying value of the assets when the obligation arises.

Expenses in connection with day-to-day maintenance and repairs are recognized in the statement of operations as they are incurred. Expenses incurred in connection with major replacements, plant turnarounds and renewals that materially extend the life of property, plant and equipment or result in future economic benefits are capitalized and depreciated on a systematic basis. The carrying amount of replaced components is expensed.

If the construction or preparation for use of property, plant or equipment extends over a period of longer than twelve months, the borrowing costs incurred on borrowed capital up to the date of completion are capitalized as part of the cost of acquisition or construction.

Property, plant and equipment are depreciated on a straight-line basis using the following estimated useful lives:

Buildings and improvements 3-25 years
Machinery and equipment 3-25 years
Other 3-25 years

If the cost of an individual part of property, plant and equipment is significant relative to the total cost of the item, the individual part is accounted for and depreciated separately. Expected useful life and residual value is re-assessed annually.

m) Goodwill and intangible assets

Goodwill represents the difference between the fair value of the consideration transferred in a business combination and the fair value of the identifiable net assets acquired at the date of acquisition. Goodwill is initially determined based on provisional fair values. Fair values are finalized within 12 months of the acquisition date. Goodwill on acquisition of subsidiaries and jointly controlled entities is separately disclosed and goodwill on acquisitions of associates is included within investments in equity accounted units. Goodwill, including goodwill in equity accounted units, is not amortized; rather it is tested annually for impairment or when there is an indication of impairment.

Intangible assets acquired as part of an acquisition of a business are capitalized separately from goodwill if the asset is separable or arises from contractual or legal rights, and the fair value can be measured reliably on initial recognition.

Purchased intangible assets are initially recorded at cost and finite-lived intangible assets are amortized over their useful economic lives on a straight-line basis. Intangible assets having indefinite lives and intangible assets that are not yet ready for use are not amortized and are tested annually for impairment or when there is an indication of impairment.

Intangible assets are considered to have indefinite lives when, based on an analysis of all of the relevant factors, there is no foreseeable limit to the period over which the asset is expected to generate cash flows for us. The factors considered in making this determination include the existence of contractual rights for unlimited terms; or evidence that renewal of the contractual rights without significant incremental cost can be expected for indefinite periods into the future in view of our future investment intentions. The life cycles of the products and processes that depend on the asset are also considered.

The following useful lives, which are re-assessed annually, have been determined for classes of finite-lived intangible assets:

The carrying amounts of non-current assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any indication of impairment exists, then the asset's recoverable amount is estimated. For goodwill and intangible assets that have indefinite lives or that are not yet available for use, the recoverable amount is estimated each year during the third quarter.

The recoverable amount of an asset or cash generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that have the ability to generate cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the "cash generating unit"). The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to cash generating units or groups of cash generating units that are expected to benefit from the synergies of the combination and reflects the lowest level at which goodwill is monitored for internal reporting purposes. If there is an indication of an impairment of an asset or cash generating unit below the level to which goodwill has been allocated, the asset or cash generating unit is tested for impairment first and any impairment loss for that asset or cash generating unit is recognized before testing at the level to which goodwill has been allocated.

An impairment loss is recognized if the carrying amount of an asset or its cash generating unit exceeds its estimated recoverable amount. Impairment losses are recognized in net earnings. Impairment losses recognized in respect of cash generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amounts of the other assets in the unit on a pro-rata basis.

An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognized in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.

Goodwill that forms part of the carrying amount of an investment in an associate is not recognized separately, and therefore is not tested for impairment separately. Instead, the entire amount of the investment in an associate is tested for impairment as a single asset when there is objective evidence that the investment in an associate may be impaired.

o) Leases

Leases whereby we assume substantially all the risks and rewards of ownership are classified as finance leases. Upon initial recognition the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. Minimum lease payments made under finance leases are apportioned between the finance cost and the reduction of the outstanding liability. The finance cost is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.

Other leases are operating leases and are not recognized on our balance sheet. Payments made under operating leases are recognized in net earnings over the term of the lease.

p) Post-employment benefits

We maintain contributory and non-contributory defined benefit and defined contribution pension plans in Canada and the United States. The majority of employees are members of defined contribution pension plans. We also maintain health care plans and life insurance benefits for retired employees. Benefits from defined benefit plans are based on either a percentage of final average earnings and years of service or a flat dollar amount for each year of service. Pension plan and post-retirement benefit costs are determined annually by independent actuaries and include current service costs, interest cost of projected benefits, return on plan assets and actuarial gains or losses. We also have non-contributory defined benefit and defined contribution plans which provide supplementary pension benefits for senior management.

Post-employment benefits are funded by us and obligations are determined using the projected unit credit method of actuarial valuation prorated over the expected length of employee service. Post-employment benefit costs for current service, interest costs and return on plan assets are charged to net earnings in the year incurred. Actuarial gains or losses are recognized immediately in other comprehensive income. Past service costs and the effects of changes in plan assumptions are amortized on a straight-line basis over the average period until the benefits become vested, or immediately if the benefits have already vested. Our contributions to defined contribution post-employment benefit plans are expensed as incurred.

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. Liabilities for bonuses and profit-sharing are recognized based on a formula that takes into consideration the profit attributable to our shareholders after certain adjustments. We recognize a liability when we have a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably.

q) Provisions

A provision is recognized if, as a result of a past event, we have a present legal or constructive obligation that can be estimated reliably, and it is more likely than not that an outflow of economic benefits will be required to settle the obligation. Where the effect of discounting is material, the expected future cash flows associated with a provision are discounted at a pre-tax rate that reflects current market assessments of the time value of money. The unwinding of the discount is recognized as a finance cost.

Environmental remediation

Environmental expenditures that relate to existing conditions caused by past operations that do not contribute to current or future revenue generation are expensed. Environmental expenditures that extend the life of the property, increase its capacity or mitigate or prevent contamination from future operations are capitalized. Costs are recorded when environmental remediation efforts are probable and the costs can be reliably estimated based on current law and existing technologies. Estimated costs are based on management's best estimate of undiscounted future costs.

Decommissioning and restoration

Provisions for decommissioning and restoration costs (asset retirement obligations) are measured based on current requirements, technology and price levels and the present value is calculated using amounts discounted over the useful economic life of the assets. The liability is recognized in the period when there is a legal or constructive obligation and a reasonable estimate can be made. A corresponding item of property, plant and equipment of an amount equivalent to the provision is also recognized and is subsequently depreciated as part of the asset. The effects of changes resulting from revisions to the timing or the amount of the original estimate of the provision are reflected on a prospective basis, by adjustment to the carrying amount of the related property, plant and equipment.

r) Share-based payments

Cash-settled plans are accounted for as liabilities where the fair value of the award is determined at the grant date using a valuation model which includes an estimated forfeiture rate. A Black-Scholes option pricing model is used for plans with a service condition and a Monte Carlo simulation model is used for plans with service and market conditions. Compensation expense is accrued, and recognized over the vesting period of the award. The fair value is re-measured at each balance sheet date and fluctuations in the fair value are recognized in the period in which the fluctuation occurs.

Equity-settled plans are accounted for using a fair value-based method. The fair value of the share-based award is determined at the grant date using a market-based option valuation model which includes an estimated forfeiture rate. The fair value of the award is recorded as compensation expense amortized over the vesting period of the award, with a corresponding increase to share capital. On exercise of the award, the proceeds are recorded as share capital.

If an employee is eligible to retire during the vesting period, we recognize compensation expense over the period from the date of grant to the retirement eligibility date. If an employee is eligible to retire on the date of grant, compensation expense is recognized on the grant date.

s) Non-current assets held for sale and discontinued operations

Non-current assets and disposal groups classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell. Non-current assets and disposal groups are classified as held for sale if their carrying amounts will be recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset or disposal group is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.

In the consolidated statements of operations of the reporting period, and of the comparable period of the previous year, income and expenses from discontinued operations are reported separate from income and expenses from continuing activities, down to the level of profit after taxes.

Once classified as held for sale, property, plant and equipment and intangible assets are not depreciated and are recognized at fair value less cost to sell. We cease using the equity method of accounting on the date from which an investment in an associate becomes held for sale.

2. BUSINESS ACQUISITION

On December 3, 2010, we acquired 100 percent of AWB Limited ("AWB"), an agribusiness operating in Australia, for $1.2-billion in cash and $37-million of acquisition costs. On December 15, 2010, we announced an agreement to sell the majority of the Commodity Management business of AWB. We will retain the Landmark retail operations, including over 200 company-operated retail locations and over 140 retail franchise and wholesale customer locations in Australia. The acquired business is included in the Retail operating segment.

The primary drivers that generate goodwill are the acquisition of a talented workforce and the value of synergies between Agrium and AWB, including expansion of geographical coverage for the sale of crop inputs and cost savings opportunities. We expect to allocate the majority of goodwill to the Retail business unit. We do not expect goodwill to be deductible for income tax purposes.

We have not completed our determination of the fair value of the assets acquired, liabilities assumed (including contingent liabilities), or related deferred income tax impacts due to the timing of the acquisition and the inherent complexity associated with the valuations. The preliminary purchase price allocation is based on carrying amounts of AWB, as adjusted for information obtained subsequent to the acquisition. Accordingly, in applying the purchase method of accounting, the excess of the purchase price over the estimated fair value of the net assets acquired has been allocated to goodwill. We expect that some of the purchase price allocated to goodwill will be allocated to property, plant and equipment, intangibles, and related deferred income tax balances. We expect that the actual amounts assigned to the fair values of the identifiable assets and liabilities acquired will differ materially from the preliminary purchase price allocation, and that some acquired property, plant and equipment and intangibles are expected to be finite-lived and accordingly subject to depreciation and amortization.

Sales of AWB for the three months ended March 31, 2011 were $533-million. It is impracticable to provide net earnings information of AWB for the same period because corporate overheads of AWB are integrated with those of Agrium.

Oil-For-Food Programme

On April 14, 1995 the United Nations established the Oil-For-Food Programme ("OFFP"), whereby the Iraqi government was allowed to raise money through the sale of oil. The revenue from the sale of oil was placed into an escrow account, with the Iraqi government allowed to use these funds to purchase food, medical supplies and other humanitarian supplies.

On June 27, 2008 the Iraqi Government filed a civil lawsuit in the U.S. District Court for the Southern District of New York against AWB and 92 other companies who participated in the OFFP, alleging that the defendants participated in an illegal conspiracy with the "former Saddam Hussein regime" to divert funds from the United Nations OFFP escrow account. The lawsuit seeks total damages in excess of $10-billion from the defendants, jointly and severally, as well as treble damages under the U.S. Racketeer Influenced and Corrupt Organizations Act. As to AWB specifically, the lawsuit alleges that AWB unlawfully diverted to the former Saddam Hussein regime more than $232-million from the escrow account established under the OFFP. AWB and a number of other defendants filed a motion to dismiss the complaint in January 2010. At May 4, 2011, the potential exposure is indeterminable.

As the impact on the operations of AWB arising from this legal action has not yet been fully determined, there is uncertainty as to the resultant impact, if any, on the financial position, financial performance and cash flows of AWB arising directly or indirectly from transactions under the OFFP. If the case against AWB is not dismissed, a possible adverse decision on the merits could have a material adverse effect on AWB and on Agrium's consolidated financial position and results.

3. DISCONTINUED OPERATIONS

We entered into an agreement on December 15, 2010 with Cargill, Incorporated ("Cargill") to sell the majority of the Commodity Management business of AWB. Completion of the sale is expected in the first half of 2011. The purchase price to be paid by Cargill will be the net asset value of the sold businesses as at the completion date of the transaction, plus a premium. We have committed to a plan to sell certain other businesses that form part of the Commodity Management business that is not being acquired by Cargill. In addition to the sale of the Commodity Management business, the pool management operations of AWB Harvest Finance Limited ("AWBHF") will be transferred to Cargill. We have agreed to various terms and conditions and indemnifications pursuant to the sale of the Commodity Management business, including an indemnity for litigation related to the OFFP, as described in note 2, Business Acquisition.

Commodity Management operations included in the agreement with Cargill are reported as discontinued operations because their operations and cash flows will be eliminated from continuing operations as a result of the disposal transaction and we will not have any significant continuing involvement in the operations after the disposal transaction. Assets and liabilities related to discontinued operations are presented separately on the consolidated balance sheets.

We have not completed our determination of the fair value less cost to sell of the assets, liabilities, or related deferred income tax impacts due to the timing of the disposition and the inherent complexity associated with the valuations.

Provisions are recognized in the period when it becomes probable that there will be a future outflow of funds resulting from past operations or events that can be reasonably estimated. The timing of recognition requires the application of judgment to existing facts and circumstances, which can be subject to change. Estimates of the amounts of provisions recognized are based on current legal and constructive requirements, technology and price levels. Actual outflows can differ from estimates due to changes in laws, regulations, public expectations, technology, prices and conditions, and can take place many years in the future. Our provisions for environmental remediation and asset retirement depend on a number of uncertain factors, such as the extent and type of remediation and/or abandonment required and the cost of these activities.

Operating lease commitments consist primarily of leases for rail cars and contractual commitments at distribution facilities in Wholesale, vehicles and application equipment in Retail, and office equipment and property leases throughout our operations. Commitments represent minimum payments under each agreement in each of the next five years. For the three months ended March 31, 2011, expenses for operating leases were $57-million (three months ended March 31, 2010 - $37-million).

The future minimum lease payments related to our operating leases are as follows:

The classification of our leases as finance leases or operating leases is based on the extent to which the risks and rewards of ownership of a leased asset have been transferred. Making this determination requires the use of management's judgment in assessing the substance of the lease transaction.

16. FINANCIAL INSTRUMENTS

In the normal course of business, our financial position, results of operations and cash flows are exposed to various risks. Sensitivity analysis to risk is provided where the effect on net earnings or shareholders' equity could be material. Sensitivity analysis is performed by relating the reasonably possible changes in the risk variable at March 31, 2011 to financial instruments outstanding on that date while assuming all other variables remain constant.

Market risk

a) Currency risk

U.S. dollar denominated transactions in our Canadian operations generate foreign exchange gains and losses on outstanding balances which are recognized in net earnings.

We manage credit risk through rigorous credit approval and monitoring practices. Geographic and industry diversity also mitigate credit risk. The Wholesale business unit sells mainly to large agribusinesses and other industrial users. Letters of credit and credit insurance are used to mitigate risk. The Retail business unit sells to a large customer base dispersed over wide geographic areas in the United States, Canada, Argentina, Chile, Australia and New Zealand. The Advanced Technologies business unit sells to a diversified customer base including large suppliers in the North American professional turf application market.

We may be exposed to certain losses in the event that counterparties to short-term investments and derivative financial instruments are unable to meet their contractual obligations. We manage this counterparty credit risk with policies requiring that counterparties to short-term investments and derivative financial instruments have an investment grade or higher credit rating and policies that limit the investing of excess funds to liquid instruments with a maximum term of one year and limit the maximum exposure to any one counterparty. We also enter into master netting agreements that mitigate our exposure to counterparty credit risk. At March 31, 2011, all counterparties to derivative financial instruments have maintained an investment grade or higher credit rating and there is no indication that any counterparty will be unable to meet their obligations under derivative financial contracts. The carrying amount of financial assets represents the maximum credit exposure.

Our primary objectives when managing capital are to provide for: a) a prudent capital structure for raising capital at a reasonable cost for the funding of ongoing operations, capital expenditures, and new growth initiatives; and b) an appropriate rate of return to shareholders in relation to the risks underlying our assets.

We monitor the ratios outlined in the table below to manage our capital.

As at As at
As at March 31, December 31, January 1,
----------------------------------------------------------------------------
2011 2010 2010 2010
----------------------------------------------------------------------------
Net debt to net debt plus equity
(%) (a) 29 17 29 16
----------------------------------------------------------------------------
Interest coverage (multiple) (b) 13.1 N/A (c) 12.2 N/A (c)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(a) Net debt includes short-term debt and long-term debt, net of cash and
cash equivalents. Equity consists of shareholders' equity.
(b) Interest coverage is the last twelve months net earnings from continuing
operations before interest expense, income taxes, depreciation,
amortization and asset impairment divided by interest, which includes
interest on long-term debt plus other interest.
(c) Twelve months of consolidated net earnings from continuing operations
before interest expense, income taxes, depreciation, amortization and
asset impairment is not available as a result of the transition to IFRS
on January 1, 2010.
(d) The measures of debt, equity and consolidated net earnings from
continuing operations described above are non-GAAP financial measures
which do not have a standardized meaning prescribed by IFRS and
therefore may not be comparable to similar measures presented by other
issuers.
(e) Our strategy for managing capital is unchanged from December 31, 2010.

Our revolving credit facilities require that we maintain specific interest coverage and debt to capital ratios as well as other non-financial covenants as defined in the debt agreement. We were in compliance with all covenants at March 31, 2011.

We have filed a base shelf prospectus in Canada and the U.S. which potentially allows issuance of up to $1.5-billion of debt, equity or other securities until December 2011. Issuance of securities requires filing a prospectus supplement and is subject to availability of funding in capital markets.

The accounting policies set out in note 1 have been applied in preparing the financial statements for the three months ended March 31, 2011, the comparative information presented in these financial statements for the three months ended March 31, 2010, for the year ended December 31, 2010 and in the preparation of an opening IFRS balance sheet at January 1, 2010 (the "transition date").

In preparing our opening IFRS balance sheet, we have adjusted amounts reported previously in financial statements prepared in accordance with previous Canadian GAAP. An explanation of how the transition from previous Canadian GAAP to IFRS has affected our financial performance, cash flows and financial position is set out in the following tables and the notes that accompany the tables.

Our adoption of IFRS requires that we apply IFRS 1 - First Time Adoption of International Financial Reporting Standards. We have restated comparative information in compliance with IFRS for periods after the transition date. A number of new standards, and amendments to standards and interpretations, are not yet effective for the year ended December 31, 2011, and have not been applied in preparing these interim financial statements. If there are any subsequent changes to IFRS that affect the first annual IFRS financial statements, these financial statements may have to be restated.

IFRS 1 requires certain mandatory exceptions and permits certain optional exemptions from this general requirement. We prepared our opening balance sheet using the following elections under IFRS 1:

----------------------------------------------------------------------------
IFRS Exemption Options Summary of Policy Selection
----------------------------------------------------------------------------
Business Combinations
We may elect, on transition to IFRS, We have elected, on transition to
to either restate all past business IFRS, to apply the exemption such
combinations in accordance with IFRS that transactions entered into prior
3 Business Combinations or to apply to the transition date will not be
an elective exemption from applying restated. Because we did not adopt
IFRS 3 to business combinations CICA Handbook section 1582 in 2010,
completed before the transition we restated business combinations
date. completed in 2010.
----------------------------------------------------------------------------
Share-Based Payments
We may elect not to apply IFRS 2, We have elected not to apply IFRS 2
Share-Based Payments, to equity to equity instruments granted on or
instruments granted on or before before November 7, 2002, or which
November 7, 2002, or which vested vested before our transition date. We
before our transition date. We may have also elected not to apply IFRS 2
also elect not to apply IFRS 2 to to liabilities arising from share-
liabilities arising from share-based based payment transactions that
payment transactions that settled settled before the transition date.
before the transition date.
----------------------------------------------------------------------------
Employee Benefits
We may elect to recognize all We have elected to recognize all
cumulative actuarial gains and cumulative actuarial gains and losses
losses through opening retained at the date of transition as an
earnings at the transition date. adjustment to retained earnings.
Actuarial gains and losses would
have to be recalculated under IFRS
from the inception of each of our
defined benefit plans to separate
recognized and unrecognized
cumulative actuarial gains and
losses if the exemption is not
taken.
----------------------------------------------------------------------------
Foreign Exchange
On transition, cumulative translation We have elected to apply the
gains or losses in accumulated other exemption and reclassify the balance
comprehensive income can be of cumulative foreign exchange
reclassified to retained earnings at translation gains or losses from
our election. If not elected, all other comprehensive income to
cumulative translation differences retained earnings at the transition
must be recalculated under IFRS from date, with no resulting change to
inception. total shareholders' equity.
----------------------------------------------------------------------------
Asset Retirement Obligations
IFRS requires changes in obligations We have elected to apply the
to dismantle, remove and restore exemption from full retrospective
items of property, plant and application at the transition date.
equipment to be added to or deducted
from the cost of the asset. The
adjusted depreciable amount of the
asset is then depreciated over its
remaining useful life. Rather than
recalculating the effect of all such
changes throughout the life of the
obligation, we may elect to measure
the liability and the related
depreciation effects at the
transition date.
----------------------------------------------------------------------------

Estimates are a mandatory exception in IFRS 1 applied in the conversion from Canadian GAAP to IFRS. Hindsight is not used to create or revise estimates. The estimates we previously made under Canadian GAAP were not revised for application of IFRS except where necessary to reflect any differences in accounting policies.